-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VX5nX6puSpJzDbukPwR1aHtsdrqCr+V1zLzrtPx0kCya+8vwQlFxtfeogYOhnhvT 0+FuYiAikJ9hzpVSXmZvFA== 0000950136-99-001599.txt : 19991223 0000950136-99-001599.hdr.sgml : 19991223 ACCESSION NUMBER: 0000950136-99-001599 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991031 FILED AS OF DATE: 19991222 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST CENTRAL INDEX KEY: 0000885125 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 136993836 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-06591 FILM NUMBER: 99779024 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CENTER CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123921600 FORMER COMPANY: FORMER CONFORMED NAME: INTERCAPITAL QUALITY MUNICIPAL INCOME TRUST DATE OF NAME CHANGE: 19920929 FORMER COMPANY: FORMER CONFORMED NAME: INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST II DATE OF NAME CHANGE: 19600201 N-30D 1 ANNUAL REPORT MORGAN STANLEY DEAN WITTER QUALITY Two World Trade Center, MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS October 31, 1999 New York, New York 10048 DEAR SHAREHOLDER: The U.S. economy, led by consumer demand, has continued to experience robust growth this year. The fixed-income markets anticipated that the Federal Reserve Board would remove the liquidity it provided during last year's international economic crises. The Fed changed monetary policy and raised the federal-funds rate 50 basis points, to 5.25 percent during the summer. By October long-term interest rates had risen to levels last seen two years ago. Subsequently, the Fed raised the federal-funds rate an additional 25 basis points to 5.50 percent in November. MUNICIPAL MARKET CONDITIONS Long-term insured municipal index yields began 1999 near a record low of 5.05 percent. By the end of October, municipal index yields had increased 100 basis points to 6.05 percent. Since bond prices move inversely to changes in interest rates, these higher yields resulted in significantly lower bond prices. The increase in yields translated into a 13 percent price decline for a generic insured municipal bond with a 30-year maturity. The municipal market outperformed U.S. Treasury bonds early in the year but gradually gave ground. The ratio of long-term insured municipal index yields to benchmark 30-year Treasury yields is a measure of relative performance. The ratio declined from 99 percent at the end of 1998 to 91 percent in May before rising to 98 percent by the end of October. A declining ratio means that municipals have outperformed Treasuries. Over the past five years the ratio has ranged from a high of 99 percent, to a low of 82 percent. Higher interest rates led to a reduction in municipal market underwriting this year. New issue volume declined 20 percent in the first ten months of 1999. Refunding activity, the most interest rate sensitive component of supply, was down 50 percent. MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS October 31, 1999, continued [THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE PURPOSE OF EDGAR FILING.] 30-YEAR BOND YIELDS 1994-1999 AAA AAA Date Ins Tsy % Relationship Date Ins Tsy % Relationship 12/31/93 5.40% 6.34% 85.17% 11/29/96 5.50 6.35 86.61% 01/31/94 5.40 6.24 86.54% 12/31/96 5.60 6.63 84.46% 02/28/94 5.80 6.66 87.09% 01/31/97 5.70 6.79 83.95% 03/31/94 6.40 7.09 90.27% 02/28/97 5.65 6.80 83.09% 04/29/94 6.35 7.32 86.75% 03/31/97 5.90 7.10 83.10% 05/31/94 6.25 7.43 84.12% 04/30/97 5.75 6.94 82.85% 06/30/94 6.50 7.61 85.41% 05/30/97 5.65 6.91 81.77% 07/29/94 6.25 7.39 84.57% 06/30/97 5.60 6.78 82.60% 08/31/94 6.30 7.45 84.56% 07/30/97 5.30 6.30 84.13% 09/30/94 6.55 7.81 83.87% 08/31/97 5.50 6.61 83.21% 10/31/94 6.75 7.96 84.80% 09/30/97 5.40 6.40 84.38% 11/30/94 7.00 8.00 87.50% 10/31/97 5.35 6.15 86.99% 12/30/94 6.75 7.88 85.66% 11/30/97 5.30 6.05 87.60% 01/31/95 6.40 7.70 83.12% 12/31/97 5.15 5.92 86.99% 02/28/95 6.15 7.44 82.66% 01/31/98 5.15 5.80 88.79% 03/31/95 6.15 7.43 82.77% 02/28/98 5.20 5.92 87.84% 04/28/95 6.20 7.34 84.47% 03/31/98 5.25 5.93 88.53% 05/31/95 5.80 6.66 87.09% 04/30/98 5.35 5.95 89.92% 06/30/95 6.10 6.62 92.15% 05/29/98 5.20 5.80 89.66% 07/31/95 6.10 6.86 88.92% 06/30/98 5.20 5.65 92.04% 08/31/95 6.00 6.66 90.09% 07/31/98 5.18 5.71 90.72% 09/29/95 5.95 6.48 91.82% 08/31/98 5.03 5.27 95.45% 10/31/95 5.75 6.33 90.84% 09/30/98 4.95 5.00 99.00% 11/30/95 5.50 6.14 89.58% 10/31/98 5.05 5.16 97.87% 12/29/95 5.35 5.94 90.07% 11/30/98 5.00 5.06 98.81% 01/31/96 5.40 6.03 89.55% 12/31/98 5.05 5.10 99.02% 02/29/96 5.60 6.46 86.69% 01/31/99 5.00 5.09 98.23% 03/29/96 5.85 6.66 87.84% 02/28/99 5.10 5.58 91.40% 04/30/96 5.95 6.89 86.36% 03/31/99 5.15 5.63 91.47% 05/31/96 6.05 6.99 86.55% 04/30/99 5.20 5.66 91.87% 06/28/96 5.90 6.89 85.63% 05/31/99 5.30 5.83 90.91% 07/31/96 5.85 6.97 83.93% 06/30/99 5.47 5.96 91.78% 08/30/96 5.90 7.11 82.98% 07/31/99 5.55 6.10 90.98% 09/30/96 5.70 6.93 82.25% 08/31/99 5.75 6.06 94.88% 10/31/96 5.65 6.64 85.09% 09/30/99 5.85 6.05 96.69% 10/31/99 6.03 6.16 97.89% Source: Municipal Market Data-A Division of Thomson Financial Municipal Group and Bloomberg L.P. PERFORMANCE In this interest rate environment, the net asset value (NAV) of Morgan Stanley Dean Witter Quality Municipal Income Trust (IQI) declined from $16.26 to $14.88 per share for the fiscal year ended October 31, 1999. Based on this change plus reinvestment of tax-free dividends totaling $0.93 per share and a long-term capital gain distribution of $0.04722 per share paid on December 18, 1998, the Trust's total NAV return was -2.26 percent. IQI's value on the New York Stock Exchange (NYSE) fell from $15.75 to $13.25 per share during the same period. Based on this change plus reinvestment of distributions, IQI's total market return was -10.21 percent. On October 31, 1999, IQI's NYSE market price represented an 11 percent discount to its NAV. Monthly dividends for the fourth quarter of 1999, declared in September, were unchanged at $0.0775 per share. The dividend rate reflects the Trust's estimated earnings over the next 6 - 12 months and its $0.090 per share cushion of undistributed net investment income on October 31, 1999. 2 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS October 31, 1999, continued PORTFOLIO STRUCTURE The Trust's investments were diversified among 14 long-term sectors and 73 credits. At the end of October, the portfolio's average maturity was 14 years. Average duration, a measure of sensitivity to interest rate changes, was 5.1 years. Issues in the refunded bond category comprised 27 percent of net assets. These bonds have been refinanced and will be redeemed on the dates shown in the portfolio. The accompanying charts provide current information on the portfolios credit quality, sector distribution and geographic diversification. Optional call provisions by year with their respective cost (book) yields are also charted. THE IMPACT OF LEVERAGING As discussed in previous shareholder reports, the total income available for distribution to common shareholders includes incremental income provided by the Trust's outstanding Auction Rate Preferred shares (ARPS). ARPS dividends reflect prevailing short-term interest rates on maturities normally ranging from one week to one year. Incremental income to common shareholders depends on two factors. The first factor is the amount of ARPS outstanding, while the second is the spread between the portfolio's cost yield and ARPS expenses (ARPS auction rate and expenses). The greater the spread and amount of ARPS outstanding, the greater the amount of incremental income available for distribution to common shareholders. The level of net investment income available for distribution to common shareholders varies with the level of short-term interest rates. ARPS leverage also increases the price volatility of common shares and has the effect of extending portfolio duration. During the 12-month period, ARPS leverage contributed approximately $0.13 per share to common share earnings. Weekly ARPS yields ranged between 2.70 and 4.875 percent. In comparison, the yield on 1-year municipal notes increased from 3.04 percent at the end of 1998, to 3.77 percent at the end of October 1999. The Trusts' five ARPS series totaled $208 million and represented 30 percent of net assets. LOOKING AHEAD The Federal Reserve Board raised interest rates twice in the summer and again in November 1999. This confirmed its previously disclosed bias of becoming less accommodative in the face of continued strong domestic economic growth. Depending on the impact of tight labor markets and higher commodity prices on inflation, the central bank may raise short-term interest rates further. However, we believe municipal bonds continue to offer long-term investors good value especially in relationship to Treasuries. The Trust's procedure for reinvestment of all dividends and distributions on common shares is through purchases in the open market. This method helps support the market value of the Trust's shares. In 3 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS October 31, 1999, continued addition, we would like to remind you that the Trustees have approved a procedure whereby the Trust, when appropriate, may purchase shares in the open market or in privately negotiated transactions at a price not above market value or net asset value, whichever is lower at the time of purchase. The Trust may also utilize procedures to reduce or eliminate the amount of outstanding ARPS, including their purchase in the open market or in privately negotiated transactions. During the fiscal year ended October 31, 1999 the Trust purchased and retired 631,700 shares of common stock at a weighted average market discount of 8.66 percent. We appreciate your ongoing support of Morgan Stanley Dean Witter Quality Municipal Income Trust and look forward to continuing to serve your investment needs. Very truly yours, /s/ CHARLES A. FIUMEFREDDO /s/ MITCHELL M. MERIN - -------------------------- --------------------- CHARLES A. FIUMEFREDDO MITCHELL M. MERIN Chairman of the Board President 4 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS October 31, 1999, continued [THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE PURPOSE OF EDGAR FILING.] LARGEST SECTORS (BAR CHART) AS OF OCTOBER 31, 1999 (% OF NET ASSETS) REFUNDED 27% WATER & SEWER 11% MORTGAGE 11% GENERAL OBLIGATION 10% IDR/PCR* 8% HOSPITAL 7% ELECTRIC 7% TRANSPORTATION 7% * INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. CREDIT RATINGS (PIE CHART) AS OF OCTOBER 31, 1999 (% OF TOTAL LONG-TERM PORTFOLIO) Aa or AA 30% A or A 19% Baa or BBB 3% Ba or BB 1% Aaa or AAA 47% AS MEASURED BY MOODY'S INVESTORS SERVICE, INC. OR STANDARD & POOR'S CORP. PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. GEOGRAPHIC SUMMARY OF INVESTMENTS BASED ON MARKET VALUE AS A PERCENT OF NET ASSETS OCTOBER 31, 1999 ALABAMA ....................... 1.2% INDIANA ....................... 1.1% PENNSYLVANIA .................. 3.9% ALASKA ........................ 1.2 MAINE ......................... 1.3 PUERTO RICO ................... 1.7 ARIZONA ....................... 0.6 MASSACHUSETTS ................. 8.1 SOUTH CAROLINA ................ 5.2 CALIFORNIA .................... 2.9 MICHIGAN ...................... 2.4 SOUTH DAKOTA .................. 0.8 COLORADO ...................... 3.6 MINNESOTA ..................... 2.9 TEXAS ......................... 4.6 CONNECTICUT ................... 2.5 MISSOURI ...................... 5.9 UTAH .......................... 0.8 DISTRICT OF COLUMBIA .......... 1.5 NEBRASKA ...................... 0.7 VIRGINIA ...................... 2.8 FLORIDA ....................... 7.3 NEVADA ........................ 3.7 WASHINGTON .................... 4.8 GEORGIA ....................... 4.4 NEW JERSEY .................... 1.3 WEST VIRGINIA ................. 1.4 HAWAII ........................ 2.0 NEW MEXICO .................... 0.9 ---- IDAHO ......................... 0.2 NEW YORK ...................... 6.3 TOTAL ......................... 98.2% ILLINOIS ...................... 8.1 OHIO .......................... 2.1 ====
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. 5 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS October 31, 1999, continued [THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE PURPOSE OF EDGAR FILING.] CALL AND COST (BOOK) YIELD STRUCTURE OCTOBER 31, 1999 WEIGHTED AVERAGE CALL PROTECTION: 4 YEARS PERCENT CALLABLE* (BAR GRAPH) 1999 2% 2000 1% 2001 10% 2002 57% 2003 13% 2004 0% 2005 1% 2006 0% 2007 1% 2008 6% 2009 6% 2010+ 3% YEARS BONDS CALLABLE WEIGHTED AVERAGE BOOK YIELD: 6.4% COST (BOOK) YIELD** BAR GRAPH 1999 6.7% 2000 6.7% 2001 6.6% 2002 6.6% 2003 6.5% 2004 0.0% 2005 6.0% 2006 0.0% 2007 6.1% 2008 6.1% 2009 5.4% 2010+ 5.9% * % BASED ON LONG-TERM PORTFOLIO. ** COST OR "BOOK" YIELD IS THE ANNUAL INCOME EARNED ON A PORTFOLIO INVESTMENT BASED ON ITS ORIGINAL PURCHASE PRICE BEFORE TRUST OPERATING EXPENSES. FOR EXAMPLE, THE TRUST EARNED A BOOK YIELD OF 6.6% ON 10% OF THE LONG-TERM PORTFOLIO THAT IS CALLABLE IN 2001. PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. 6 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST RESULTS OF ANNUAL MEETING (unaudited) * * * On October 28, 1999, an annual meeting of the Trust's shareholders was held for the purpose of voting on four separate matters, the results of which were as follows: (1) ELECTION OF TRUSTEE BY ALL SHAREHOLDERS: Michael Bozic For ........................................... 26,691,296 Withheld ...................................... 602,589 (2) ELECTION OF TRUSTEE BY PREFERRED SHAREHOLDERS: Charles A. Fiumefreddo For ........................................... 3,580 Withheld ...................................... 0 The following Trustees were not standing for reelection at this meeting: Edwin J. Garn, Wayne E. Hedien, Dr. Manuel H. Johnson, Michael E. Nugent, Philip J. Purcell and John L. Schroeder. (3) RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS: For ........................................... 26,299,317 Against ....................................... 304,988 Abstain ....................................... 689,580 In addition, a shareholder proposal to amend the Trust's Declaration of Trust to require each Trustee, within 30 days of election, to become a shareholder of the Trust failed to obtain the necessary quorum of a majority of each of the common and preferred shares outstanding and entitled to vote at the meeting. Although no quorum was obtained, the following represents the total of the shares whose votes were returned to the Trust prior to the meeting. Vote: Number of Common Shares Number of Preferred Shares For ............. 4,458,151 For .............. 158 Against ......... 10,640,797 Against .......... 163 Abstain ......... 1,576,782 Abstain .......... 20 7 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS October 31, 1999
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - --------------------------------------------------------------------------------------------------------------------------------- TAX-EXEMPT MUNICIPAL BONDS (97.1%) General Obligation (10.3%) $ 4,000 Denver City & County School Dist No 1, Colorado, Ser 1999 (FGIC) ............ 5.25 % 12/01/16 $ 3,730,400 Hawaii, 5,000 1992 Ser BZ ................................................................ 6.00 10/01/10 5,232,250 8,000 1992 Ser BZ ................................................................ 6.00 10/01/11 8,346,000 4,000 Cook County, Illinois, Ser 1992 C (FGIC) .................................... 6.00 11/15/09 4,222,160 1,275 New York City, New York, 1992 Ser B ......................................... 7.00 02/01/20 1,349,664 South Carolina, 14,000 Highway Ser 1999 A ......................................................... 4.60 05/01/18 11,913,580 10,000 Highway Ser 1999 A ......................................................... 4.60 05/01/19 8,441,800 5,000 Houston Independent School District, Texas, PSF Gtd School & Refg Ser 1999 A .......................................................... 5.25 02/15/18 4,581,250 9,035 San Antonio, Texas, Refg Ser 1992 ........................................... 5.75 08/01/13 9,068,249 15,000 Washington, Ser 1993 A ...................................................... 5.75 10/01/17 14,719,799 --------- ------------ 75,310 71,605,152 --------- ------------ Education Facilities Revenue (1.9%) 2,500 University of Illinois, Auxiliary Ser 1991 .................................. 5.75 04/01/22 2,408,475 5,000 Massachusetts Health & Educational Facilities Authority, Brandeis University 1998 Ser I (MBIA) ............................................... 4.75 10/01/28 4,064,700 Scranton-Lackawanna Health & Welfare Authority, Pennsylvania, 3,000 University of Scranton 1992 Ser A .......................................... 6.40 03/01/07 3,153,000 3,300 University of Scranton 1992 Ser A .......................................... 6.50 03/01/13 3,408,834 --------- ------------ 13,800 13,035,009 --------- ------------ Electric Revenue (7.1%) 3,000 Los Angeles Department of Water & Power, California, Issue of 1992 .......... 6.375 02/01/20 3,110,970 9,500 Orlando Utilities Commission, Florida, Ser 1991 A ........................... 5.50 10/01/26 8,857,040 10,000 Municipal Electric Authority of Georgia, Power 1992 Ser B (Secondary MBIA) ........................................................... 6.375 01/01/16 10,402,000 5,000 Hastings, Nebraska, Refg Ser 1992 ........................................... 6.30 01/01/19 5,201,650 10,000 Hamilton!, Ohio, Refg 1992 Ser A (FGIC) ..................................... 6.00 10/15/23 10,020,900 2,000 Intermountain Power Agency, Utah, Refg 1996 Ser D (Secondary FSA) ........... 5.00 07/01/21 1,711,560 Grant County Public Utility District #2, Washington, 8,220 Priest Rapids Hydro Second Ser 1992 A ...................................... 5.00 01/01/23 7,114,492 2,645 Wanapum Hydro Second Ser 1992 B (AMT) ...................................... 6.75 01/01/23 2,760,243 --------- ------------ 50,365 49,178,855 --------- ------------ Hospital Revenue (7.5%) 5,000 Birmingham-Carraway Special Care Facilities Financing Authority, Alabama, Carraway Methodist Health Ser 1995 A (Connie Lee) .......................... 5.875 08/15/15 4,891,400 9,250 Massachusetts Health & Educational Facilities Authority, Massachusetts General Hospital Ser F (AMBAC) ............................................. 6.00 07/01/15 9,467,375 10,000 Missouri Health & Educational Facilities Authority, Health Midwest Ser 1992 B (MBIA) .......................................................... 6.25 02/15/22 10,069,800 10,000 New York State Medical Care Facilities Finance Agency, The Mount Sinai Hospital - FHA Insured Mortgage 1992 Ser C ................................. 5.75 08/15/19 9,734,200
SEE NOTES TO FINANCIAL STATEMENTS 8 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS October 31, 1999, continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - --------------------------------------------------------------------------------------------------------------------------------- $ 4,500 Cuyahoga County, Ohio, Cleveland Clinic Foundation Refg Ser 1992 .............. 5.50 % 11/15/11 $ 4,460,805 5,000 Dauphin County General Authority, Pennsylvania, HAPSO Group Inc/ The Western Pennsylvania Hospital Refg 1992 Ser A (MBIA) ..................... 6.25 07/01/16 5,045,700 3,000 Philadelphia Hospitals & Higher Education Facilities Authority, Pennsylvania, Chestnut Hill Hospital Ser of 1992 ........................................... 6.375 11/15/11 3,024,900 5,000 South Dakota Health & Educational Facilities Authority, Queen of Peace Hospital Ser 1992 (MBIA) ..................................................... 6.70 07/01/17 5,287,000 --------- ------------ 51,750 51,981,180 --------- ------------ Industrial Development/Pollution Control Revenue (7.6%) 6,000 California Pollution Control Financing Authority, Keller Cannon Landfill Co/ Browning-Ferris Industries Inc Ser 1992 (AMT) ................................ 6.875 11/01/27 5,919,300 5,000 Citrus County, Florida, Florida Power Corp Refg Ser 1992 B .................... 6.35 02/01/22 5,059,350 5,000 Washoe County, Nevada, Sierra Pacific Power Co Ser 1987 (AMT) (MBIA) .......... 6.65 06/01/17 5,264,550 15,000 Berkeley County, South Carolina, South Carolina Electric & Gas Co Ser 1984..... 6.50 10/01/14 15,625,350 10,000 Brazos River Authority, Texas, Houston Lighting & Power Co Ser 1992 B (MBIA) ....................................................................... 6.375 04/01/12 10,601,700 10,000 Mason County, West Virginia, Appalachian Power Co Ser J ....................... 6.60 10/01/22 10,083,900 --------- ------------ 51,000 52,554,150 --------- ------------ Mortgage Revenue - Multi-Family (5.6%) 7,000 Illinois Housing Development Authority, Ser I ................................. 6.625 09/01/12 7,257,950 15,705 Michigan Housing Development Authority, Rental 1992 Ser A (Bifurcated FSA) ............................................................. 6.50 04/01/23 16,460,253 Missouri Housing Development Commission, 6,505 Federally Insured Mortgage Loans Refg Ser 11/15/92 ........................... 6.50 07/01/16 6,610,121 8,270 Federally Insured Mortgage Loans Refg Ser 11/15/92 ........................... 6.60 07/01/24 8,429,611 --------- ------------ 37,480 38,757,935 --------- ------------ Mortgage Revenue - Single Family (4.9%) 16,495 Connecticut Housing Finance Authority, 1992 Ser B ............................. 6.70 11/15/12 17,355,213 6,080 Georgia Housing & Finance Authority, Home Ownership 1992 Ser C ................ 6.50 12/01/11 6,227,258 1,125 Idaho Housing Agency, 1992 Ser E (AMT) ........................................ 6.75 07/01/12 1,157,400 Minnesota Housing Finance Agency, 2,780 Ser 1992 D-1 ................................................................. 6.50 01/01/17 2,846,915 6,020 Ser 1992 CD-1 (AMT) .......................................................... 6.75 07/01/23 6,150,574 --------- ------------ 32,500 33,737,360 --------- ------------ Nursing & Health Related Facilities Revenue (1.6%) 11,250 Minneapolis & Saint Paul Housing & Redevelopment Authority, Minnesota, --------- Group Health Plan Inc Ser 1992 ................................................ 6.90 10/15/22 11,369,813 ------------ Public Facilities Revenue (3.1%) 10,000 Atlanta Downtown Development Authority, Georgia, Underground Atlanta Refg Ser 1992 ................................................................ 6.25 10/01/16 10,301,700 3,645 Illinois, Civic Center Ser 1990 A (AMBAC) ..................................... 6.00 12/15/15 3,645,875 7,370 Indianapolis Local Public Improvement Bond Bank, Indiana, Ser 1992 D .......... 6.75 02/01/20 7,784,268 --------- ------------ 21,015 21,731,843 --------- ------------
SEE NOTES TO FINANCIAL STATEMENTS 9 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS October 31, 1999, continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - --------------------------------------------------------------------------------------------------------------------------------- Resource Recovery Revenue (1.9%) $ 12,930 Broward County, Florida, Broward Waste Energy Co North Ser 1984 ............. 7.95 % 12/01/08 $ 13,351,001 --------- ------------ Transportation Facilities Revenue (6.6%) Dade County, Florida, 3,000 Aviation 1992 Ser B (AMT) (MBIA) ........................................... 6.55 10/01/13 3,184,350 5,000 Aviation 1992 Ser B (AMT) (MBIA) ........................................... 6.60 10/01/22 5,263,550 13,000 Chicago, Illinois, Chicago-O'Hare Int'l Terminal Ser 1992 (AMT) (MBIA) ...... 6.75 01/01/12 13,664,950 4,000 Regional Transportation Authority, Illinois, Refg Ser 1999 (FSA) ............ 5.75 06/01/21 3,912,720 2,000 Massachusetts Turnpike Authority, Metropolitan Highway 1997 Ser A (MBIA) ............................................................... 5.00 01/01/37 1,665,700 2,390 St Louis, Missouri, Lambert-St Louis Int'l Airport Ser 1992 (AMT) (FGIC) .... 6.00 07/01/08 2,475,204 New Jersey Transportation Trust Fund Authority, 5,000 1998 Ser A (FSA) ........................................................... 4.50 06/15/19 4,131,350 5,000 1999 Ser A ................................................................. 5.75 06/15/20 4,951,950 6,000 Puerto Rico Highway & Transportation Authority, Refg Ser V .................. 6.625 07/01/12 6,322,800 --------- ------------ 45,390 45,572,574 --------- ------------ Water & Sewer Revenue (11.1%) 4,000 Birmingham, Alabama, Water & Sewer Ser 1998 A ............................... 4.75 01/01/21 3,349,960 6,000 Tampa Bay Water, Florida, Utility Ser 1998 B (FGIC) ......................... 4.75 10/01/27 4,940,640 5,000 Douglasville - Douglas County Water & Sewer Authority, Georgia, Ser 1998 (FGIC) ............................................................ 4.50 06/01/23 3,937,900 15,000 Massachusetts Water Pollution Abatement Trust, MWRA Loan Ser 1998 A.......... 4.75 08/01/18 12,754,650 Massachusetts Water Resources Authority, 10,000 1992 Ser B ................................................................. 5.50 11/01/15 9,609,300 10,000 1998 Ser A (FSA) ........................................................... 4.50 08/01/22 8,002,700 3,335 Rio Rancho, New Mexico, Water & Wastewater Refg Ser 1999 (AMBAC) ............ 5.25 05/15/19 3,042,153 20,000 New York City Municipal Water Finance Authority, New York, Ser 1993 A........ 6.00 06/15/17 20,006,200 7,510 Houston, Texas, Water & Sewer Jr Lien Refg Ser 1991 C (AMBAC) ............... 6.375 12/01/17 7,721,557 3,895 Fairfax County Water Authority, Virginia, Refg Ser 1992 ..................... 6.00 04/01/22 3,900,336 --------- ------------ 84,740 77,265,396 --------- ------------ Other Revenue (0.7%) 3,360 Albuquerque, New Mexico, Gross Receipts Refg Ser 1999 C ..................... 5.25 07/01/17 3,101,213 2,500 Philadelphia, Pennsylvania, Gas Works First Ser 1998 B (FSA) ................ 5.00 07/01/28 2,108,725 --------- ------------ 5,860 5,209,938 --------- ------------ Refunded (27.2%) 7,500 Alaska Housing Finance Corporation, Gen Hsg 1992 Ser A ...................... 6.60 12/01/02+ 8,082,075 10,000 Central Coast Water Authority, California, Ser 1992 (AMBAC) ................. 6.50 10/01/02+ 10,826,100 20,000 Jefferson County School District #R-1, Colorado, Ser 1992 (AMBAC) ........... 6.00 12/15/02+ 21,099,000 10,000 District of Columbia, Howard University Refg Ser 1992 A ..................... 6.75 10/01/02+ 10,802,000 9,800 Orlando, Florida, Cap Impr Refg Ser 1992 .................................... 6.00 10/01/01+ 10,304,896 20,000 Illinois Toll Highway Authority, Priority 1992 Ser A ........................ 6.375 01/01/03+ 21,424,400 8,550 Maine Municipal Bond Bank, 1992 Ser E ....................................... 6.25 11/01/02+ 9,150,808 10,000 Massachusetts Water Resources Authority, 1990 Ser A ......................... 6.50 12/01/01+ 10,640,400 12,610 St Louis, Missouri, Lambert - St Louis Int'l Airport Ser 1992 (AMT) (FGIC)... 6.00 07/01/02+ 13,323,852
SEE NOTES TO FINANCIAL STATEMENTS 10 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS October 31, 1999 , continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - --------------------------------------------------------------------------------------------------------------------------------- $ 19,700 Clark County, Nevada, Las Vegas - McCaran Int'l Airport Passenger Facility Charge 1992 Ser B (AMT) ..................................... 6.25 % 07/01/02+ $ 20,840,630 12,000 New York Local Government Assistance Corporation, Ser 1991 C .......... 7.00 04/01/01+ 12,686,520 10,000 Allegheny County Hospital Development Authority, Pennsylvania, Presbyterian University Health Ser 1992 A (MBIA) ..................... 6.25 11/01/02+ 10,509,800 5,000 Puerto Rico Highway & Transportation Authority, Ser T ................. 6.625 07/01/02+ 5,376,800 15,000 Fredericksburg Industrial Development Authority, Virginia, MWH Medicorp Ser 1991 A & B (FGIC) ................................... 6.60 08/15/01+ 15,828,450 8,000 Grant County Public Utility District #2, Washington, Wanapum Hydro --------- Second Ser 1992 A ..................................................... 6.375 01/01/02+ 8,465,440 ------------ 178,160 189,361,171 --------- ------------ 671,550 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $646,444,964)................................. 674,711,377 --------- ------------ SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (1.1%) 4,000 Maricopa County, Arizona, Arizona Public Service Co Ser 1994 E (Demand 11/01/99) .................................................... 3.50* 05/01/29 4,000,000 4,000 Salt Lake County, Utah, Service Station Holdings British Petroleum Co --------- Ser 1994 B (Demand 11/01/99) ......................................... 3.60* 08/01/07 4,000,000 ------------ 8,000 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Identified Cost $8,000,000) ................. 8,000,000 --------- ------------ $ 679,550 TOTAL INVESTMENTS (Identified Cost $654,444,964) (a)............................ 98.2% 682,711,377 ========= CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ................................. 1.8 12,467,715 ----- ------------ NET ASSETS ..................................................................... 100.0% $695,179,092 ===== ============
- --------------- AMT Alternative Minimum Tax. + Prerefunded to call date shown. * Current coupon of variable rate demand obligation. (a) The aggregate cost for federal income tax purposes approximates identified cost. The aggregate gross unrealized appreciation is $33,291,062 and the aggregate gross unrealized depreciation is $5,024,649, resulting in net unrealized appreciation of $28,266,413. Bond Insurance: - --------------- AMBAC AMBAC Assurance Corporation. Connie Lee Connie Lee Insurance Company - A wholly owned subsidiary of AMBAC Assurance Corporation. FGIC Financial Guaranty Insurance Company. FSA Financial Security Assurance Inc. MBIA Municipal Bond Investors Assurance Corporation. SEE NOTES TO FINANCIAL STATEMENTS 11 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES October 31, 1999 ASSETS: Investments in securities, at value (identified cost $654,444,964).................. $682,711,377 Cash .............................................. 304,868 Receivable for: Interest ..................................... 11,489,967 Investment sold .............................. 1,648,734 Prepaid expenses .................................. 414,958 ------------ TOTAL ASSETS .................................. 696,569,904 ------------ LIABILITIES: Payable for: Dividends to preferred shareholders .......... 570,922 Shares of beneficial interest repurchased..... 447,900 Investment management fee .................... 249,378 Accrued expenses .................................. 122,612 ------------ TOTAL LIABILITIES ............................. 1,390,812 ------------ NET ASSETS .................................... $695,179,092 ============ COMPOSITION OF NET ASSETS: Preferred shares of beneficial interest (1,000,000 shares authorized of non-participating $.01 par value, 4,160 shares outstanding) ............................ $208,000,000 ------------ Common shares of beneficial interest (unlimited shares authorized of $.01 par value, 32,730,413 shares outstanding) ................................... 457,103,006 Net unrealized appreciation ....................... 28,266,413 Accumulated undistributed net investment income ......................................... 2,931,853 Accumulated net realized loss ..................... (1,122,180) ------------ NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS .................................. 487,179,092 ------------ TOTAL NET ASSETS .............................. $695,179,092 ============ NET ASSET VALUE PER COMMON SHARE ($487,179,092 divided by 32,730,413 common shares outstanding) ....................... $14.88 ====== STATEMENT OF OPERATIONS For the year ended October 31, 1999 NET INVESTMENT INCOME: INTEREST INCOME ............................... $42,284,627 ----------- EXPENSES Investment management fee ..................... 2,569,508 Auction commission fees ....................... 755,056 Transfer agent fees and expenses .............. 144,714 Professional fees ............................. 129,190 Shareholder reports and notices ............... 77,391 Auction agent fees ............................ 36,772 Registration fees ............................. 33,083 Custodian fees ................................ 30,845 Trustees' fees and expenses ................... 18,110 Other ......................................... 52,267 ----------- TOTAL EXPENSES ............................ 3,846,936 Less: expense offset .......................... (30,720) ----------- NET EXPENSES .............................. 3,816,216 ----------- NET INVESTMENT INCOME ..................... 38,468,411 ----------- NET REALIZED AND UNREALIZED LOSS: Net realized loss ............................. (1,122,180) Net change in unrealized appreciation ......... (43,771,021) ----------- NET LOSS .................................. (44,893,201) ----------- NET DECREASE .................................. $(6,424,790) =========== SEE NOTES TO FINANCIAL STATEMENTS 12 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST FINANCIAL STATEMENTS, continued STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR FOR THE YEAR ENDED ENDED OCTOBER 31, 1999 OCTOBER 31, 1998 - -------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income ................................. $ 38,468,411 $ 39,678,571 Net realized gain (loss) .............................. (1,122,180) 1,575,250 Net change in unrealized appreciation ................. (43,771,021) 10,150,568 ------------- ------------- NET INCREASE (DECREASE) ............................ (6,424,790) 51,404,389 ------------- ------------- Dividends to preferred shareholders from net investment income .............................................. (7,437,084) (7,814,424) ------------- ------------- DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: Net investment income ................................. (30,960,584) (31,143,053) Net realized gain ..................................... (1,575,210) (998,640) ------------- ------------- TOTAL DIVIDENDS AND DISTRIBUTIONS .................. (32,535,794) (32,141,693) ------------- ------------- Decrease from transactions in common shares of beneficial interest ................................. (8,751,946) (3,623,524) ------------- ------------- NET INCREASE (DECREASE) ............................ (55,149,614) 7,824,748 NET ASSETS: Beginning of period ................................... 750,328,706 742,503,958 ------------- ------------- END OF PERIOD (Including undistributed net investment income of $2,931,853 and $2,861,110, respectively) ........... $ 695,179,092 $ 750,328,706 ============= =============
SEE NOTES TO FINANCIAL STATEMENTS 13 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS October 31, 1999 1. ORGANIZATION AND ACCOUNTING POLICIES Morgan Stanley Dean Witter Quality Municipal Income Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended, as a diversified, closed-end management investment company. The Trust's investment objective is to provide current income which is exempt from federal income tax. The Trust was organized as a Massachusetts business trust on March 12, 1992 and commenced operations on September 29, 1992. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of significant accounting policies: A. VALUATION OF INVESTMENTS - Portfolio securities are valued by an outside independent pricing service approved by the Trustees. The pricing service has informed the Trust that in valuing the portfolio securities, it uses both a computerized matrix of tax-exempt securities and evaluations by its staff, in each case based on information concerning market transactions and quotations from dealers which reflect the bid side of the market each day. The portfolio securities are thus valued by reference to a combination of transactions and quotations for the same or other securities believed to be comparable in quality, coupon, maturity, type of issue, call provisions, trading characteristics and other features deemed to be relevant. Short-term debt securities having a maturity date of more than sixty days at time of purchase are valued on a mark-to-market basis until sixty days prior to maturity and thereafter at amortized cost based on their value on the 61st day. Short-term debt securities having a maturity date of sixty days or less at the time of purchase are valued at amortized cost. B. ACCOUNTING FOR INVESTMENTS - Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on security transactions are determined by the identified cost method. The Trust amortizes premiums and accretes discounts over the life of the respective securities. Interest income is accrued daily. C. FEDERAL INCOME TAX STATUS - It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable and nontaxable income to its shareholders. Accordingly, no federal income tax provision is required. D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - The Trust records dividends and distributions to its shareholders on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations 14 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS October 31, 1999, continued which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for financial reporting purposes but not for tax purposes are reported as dividends in excess of net investment income or distributions in excess of net realized capital gains. To the extent they exceed net investment income and net realized capital gains for tax purposes, they are reported as distributions of paid-in-capital. 2. INVESTMENT MANAGEMENT AGREEMENT Pursuant to an Investment Management Agreement with Morgan Stanley Dean Witter Advisors Inc. (the "Investment Manager"), the Trust pays the Investment Manager a management fee, calculated weekly and payable monthly, by applying the annual rate of 0.35% to the Trust's weekly net assets. Under the terms of the Agreement, in addition to managing the Trust's investments, the Investment Manager maintains certain of the Trust's books and records and furnishes, at its own expense, office space, facilities, equipment, clerical, bookkeeping and certain legal services and pays the salaries of all personnel, including officers of the Trust who are employees of the Investment Manager. The Investment Manager also bears the cost of telephone services, heat, light, power and other utilities provided to the Trust. 3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES The cost of purchases and proceeds from sales of portfolio securities, excluding short-term investments, for the year ended October 31, 1999 aggregated $152,331,572 and $167,153,736, respectively. Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager, is the Trust's transfer agent. At October 31, 1999, the Trust had transfer agent fees and expenses payable of approximately $3,000. The Trust has an unfunded noncontributory defined benefit pension plan covering all independent Trustees of the Trust who will have served as independent Trustees for at least five years at the time of retirement. Benefits under this plan are based on years of service and compensation during the last five years of service. Aggregate pension costs for the year ended October 31, 1999 included in Trustees' fees and expenses in the Statement of Operations amounted to $5,543. At October 31, 1999, the Trust had an accrued pension liability of $38,990 which is included in accrued expenses in the Statement of Assets and Liabilities. 15 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS October 31, 1999, continued 4. PREFERRED SHARES OF BENEFICIAL INTEREST The Trust is authorized to issue up to 1,000,000 non-participating preferred shares of beneficial interest having a par value of $.01 per share, in one or more series, with rights as determined by the Trustees, without approval of the common shareholders. The Trust has issued Series 1 through 5 Auction Rate Preferred Shares ("Preferred Shares") which have a liquidation value of $50,000 per share plus the redemption premium, if any, plus accumulated but unpaid dividends, whether or not declared, thereon to the date of distribution. The Trust may redeem such shares, in whole or in part, at the original purchase price of $50,000 per share plus accumulated but unpaid dividends, whether or not declared, thereon to the date of redemption. Dividends, which are cumulative, are reset through auction procedures.
AMOUNT IN RESET RANGE OF SERIES SHARES* THOUSANDS* RATE* DATE DIVIDEND RATES** - -------- --------- ------------ ----------- ---------- ------------------ 1 1,120 $56,000 3.925% 09/06/00 3.56% - 3.925% 2 400 20,000 3.20 02/03/00 3.20 - 3.689 3 1,120 56,000 3.65 07/06/00 3.65 - 3.70 4 1,120 56,000 3.349 01/13/00 3.349 - 3.65 5 400 20,000 3.35 11/05/99 2.70 - 4.875
- --------------- * As of October 31, 1999. ** For the year ended October 31, 1999. Subsequent to October 31, 1999 and up through December 3, 1999, the Trust paid dividends to each of the Series 1 through 5 at rates ranging from 3.20% to 3.925% in the aggregate amount of $1,195,755. The Trust is subject to certain restrictions relating to the preferred shares. Failure to comply with these restrictions could preclude the Trust from declaring any distributions to common shareholders or purchasing common shares and/or could trigger the mandatory redemption of preferred shares at liquidation value. The preferred shares, which are entitled to one vote per share, generally vote with the common shares but vote separately as a class to elect two Trustees and on any matters affecting the rights of the preferred shares. 16 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS October 31, 1999, continued 5. COMMON SHARES OF BENEFICIAL INTEREST Transactions in common shares of beneficial interest were as follows:
CAPITAL PAID IN EXCESS OF SHARES PAR VALUE PAR VALUE -------------- ----------- --------------- Balance, October 31, 1997 ............................................... 33,602,513 $336,025 $469,142,451 Treasury shares purchased and retired (weighted average discount 5.89%)* (240,400) (2,404) (3,621,120) ---------- -------- ------------ Balance, October 31, 1998 ............................................... 33,362,113 333,621 465,521,331 Treasury shares purchased and retired (weighted average discount 8.66%)* (631,700) (6,317) (8,745,629) ---------- -------- ------------ Balance, October 31, 1999 ............................................... 32,730,413 $327,304 $456,775,702 ========== ======== ============
- --------------- * The Trustees have voted to retire the shares purchased. 6. FEDERAL INCOME TAX STATUS At October 31, 1999, the Trust had a net capital loss carryover of approximately $1,122,000, which will be available through October 31, 2007 to offset future capital gains to the extent provided by regulations. 7. DIVIDENDS TO COMMON SHAREHOLDERS On September 28, 1999, the Trust declared the following dividends from net investment income: AMOUNT RECORD PAYABLE PER SHARE DATE DATE - -------------- ------------------ ------------------ $ 0.0775 November 5, 1999 November 19, 1999 $ 0.0775 December 3, 1999 December 17, 1999 17 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST FINANCIAL HIGHLIGHTS Selected ratios and per share data for a common share of beneficial interest outstanding throughout each period:
FOR THE YEAR ENDED OCTOBER 31* --------------------------------------------------------------------- 1999 1998 1997 1996 1995 - ---------------------------------------------------------------------------------------------------------------------------------- SELECTED PER SHARE DATA: Net asset value, beginning of period ...................... $ 16.26 $ 15.91 $ 15.44 $ 15.33 $ 13.62 -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income .................................... 1.16 1.19 1.20 1.19 1.18 Net realized and unrealized gain (loss) .................. (1.36) 0.34 0.51 0.13 1.66 -------- -------- -------- -------- -------- Total income (loss) from investment operations ............ (0.20) 1.53 1.71 1.32 2.84 -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income .................................... (0.93) (0.93) (0.99) (0.99) (0.99) Common share equivalent of dividends paid to preferred shareholders ............................................ (0.22) (0.23) (0.23) (0.22) (0.22) Net realized gain ........................................ (0.05) (0.03) (0.03) (0.04) - -------- -------- -------- -------- -------- Total dividends and distributions ......................... (1.20) (1.19) (1.25) (1.25) (1.21) -------- -------- -------- -------- -------- Anti-dilutive effect of acquiring treasury shares ......... 0.02 0.01 0.01 0.04 0.08 -------- -------- -------- -------- -------- Net asset value, end of period ............................ $ 14.88 $ 16.26 $ 15.91 $ 15.44 $ 15.33 ======== ======== ======== ======== ======== Market value, end of period ............................... $ 13.25 $ 15.75 $ 14.875 $ 14.625 $ 13.75 ======== ======== ======== ======== ======== TOTAL RETURN+ ............................................. (10.21)% 12.66% 8.84% 14.27% 24.77% RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS: Total expenses ............................................ 0.73% 0.71% (1) 0.70% (1) 0.69% (1) 0.72% (1) Net investment income before preferred stock dividends .... 7.32% 7.35% 7.68% 7.73% 8.05% Preferred stock dividends ................................. 1.42% 1.45% 1.47% 1.41% 1.53% Net investment income available to common shareholders .... 5.90% 5.90% 6.21% 6.32% 6.52% SUPPLEMENTAL DATA: Net assets, end of period, in thousands ................... $695,179 $750,329 $742,504 $734,799 $752,840 Asset coverage on preferred shares at end of period ....... 333% 360% 356% 353% 361% Portfolio turnover rate ................................... 21% 2% 2% - 1%
- ------------- * The per share amounts were computed using an average number of shares outstanding during the period. + Total return is based upon the current market value on the last day of each period reported. Dividends and distributions are assumed to be reinvested at the prices obtained under the Trust's dividend reinvestment plan. Total return does not reflect brokerage commissions. (1) Does not reflect the effect of the expense offset of 0.01%. SEE NOTES TO FINANCIAL STATEMENTS 18 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST REPORT OF INDEPENDENT ACCOUNTANTS TO THE SHAREHOLDERS AND TRUSTEES OF MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Morgan Stanley Dean Witter Quality Municipal Income Trust (the "Trust") at October 31, 1999, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trust's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 1999 by correspondence with the custodian, provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, New York 10036 December 9, 1999 1999 FEDERAL TAX NOTICE (unaudited) During the year ended October 31, 1999, the Trust paid the following per share amounts from tax-exempt income: $0.94 to common shareholders, $1,746 to Series 1 preferred shareholders, $1,640 to Series 2 preferred shareholders, $1,805 to Series 3 preferred shareholders, $1,677 to Series 4 preferred shareholders and $1,564 to Series 5 preferred shareholders. For the year ended October 31, 1999, the Trust paid the following per share amounts from long-term capital gains: $0.04 to common shareholders, $82 to Series 1 preferred shareholders, $79 to Series 2 preferred shareholders, $77 to Series 3 preferred shareholders, $74 to Series 4 preferred shareholders and $72 to Series 5 preferred shareholders. 19 TRUSTEES - ------------------------------------------- Michael Bozic Charles A. Fiumefreddo Edwin J. Garn Wayne E. Hedien Dr. Manuel H. Johnson Michael E. Nugent Philip J. Purcell John L. Schroeder OFFICERS - ------------------------------------------- Charles A. Fiumefreddo Chairman and Chief Executive Officer Mitchell M. Merin President Barry Fink Vice President, Secretary and General Counsel James F. Willison Vice President Thomas F. Caloia Treasurer TRANSFER AGENT - ------------------------------------------- Morgan Stanley Dean Witter Trust FSB Harborside Financial Center - Plaza Two Jersey City, New Jersey 07311 INDEPENDENT ACCOUNTANTS - ------------------------------------------- PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, New York 10036 INVESTMENT MANAGER - ------------------------------------------- Morgan Stanley Dean Witter Advisors Inc. Two World Trade Center New York, New York 10048 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST ANNUAL REPORT OCTOBER 31, 1999 -----END PRIVACY-ENHANCED MESSAGE-----